JAKKS Pacific Reports Second Quarter 2016 Financial Results
Company Reiterates Growth in 2016 Financial Guidance
SANTA MONICA, Calif.–(BUSINESS WIRE)–JAKKS Pacific, Inc. [NASDAQ: JAKK] today reported financial results for
the second quarter ended June 30, 2016.
Second Quarter Highlights
- Sales increased 8 percent
- Gross margin increased 180 basis points
- Operating margin improved 150 basis points
- Net loss attributable to JAKKS Pacific decreased 23 percent
- Adjusted EBITDA increased 166 percent
- Inventory levels declined 22 percent year over year
Net sales for second quarter 2016 increased 8 percent to $141.0 million
from $131.1 million reported in the comparable period in 2015. The
reported net loss attributable to JAKKS Pacific for second quarter 2016
was $4.4 million, or $0.27 per diluted share, down from a net loss of
$5.7 million, or $0.30 per diluted share, reported in the comparable
period in 2015. Adjusted EBITDA for the second quarter increased to $4.0
million, compared to Adjusted EBITDA of $1.5 million in 2015. See note
below on “Use of Non-GAAP Financial Information.”
First Half 2016 Financial Overview
Net sales for the six months ending June 30, 2016 were $236.8 million
compared to $245.3 million in 2015. The reported net loss attributable
to JAKKS Pacific for the six month period was $21.8 million, or $1.30
per diluted share. This compares to a net loss for the first six months
of 2015 of $13.3 million, or $0.69 per diluted share. Adjusted EBITDA
for the first six months of 2016 was negative $5.1 million, compared to
Adjusted EBITDA of $0.6 million for the first six months of 2015.
“We had a solid second quarter performance in line with expectations,
and we delivered better than consensus revenue and earnings with
continuing margin improvement and operating efficiencies reflected in
the increased Adjusted EBITDA year over year. This marks the third
consecutive second quarter showing year-over-year growth in revenue and
earnings,” said Stephen Berman, JAKKS Pacific Chairman and Chief
Executive Officer.
“We believe we have created a strong foundation as we head into the
important second half of the year. I am confident we can continue the
momentum of growth and profitability with our compelling portfolio of
brands, and innovative product introductions in the back half of the
year,” said Berman.
In second half 2016, JAKKS Pacific is set to unveil several new exciting
products across a number of categories for the upcoming Fall and holiday
seasons. From magical dolls to mini-collectibles to radio controlled
vehicles, JAKKS Pacific has a robust line-up of on-trend and engaging
products for kids and kids at heart. A few highlights include Northern
Lights Elsa, the next iteration of JAKKS Pacific successful large-scale
Frozen dolls this year features a magical light show on Elsa’s dress;
kids can transform Cinderella’s look with Disney Princess Magical Wand
Cinderella which features lights, sounds and music; Gift ‘ems, the only
collectible mini-doll line which features the universally known gift box
to surprise girls with a “friend” from different cities around the
world; XPV Skateboarding Mikey inspired by the popular Michelangelo
character from the Teenage Mutant Ninja Turtles; BIG-FIGS large-scale
figures based on the popular Star Wars franchise as well as the DC
Universe; Nintendo characters are all the rage and we will release new
World of Nintendo action figures and vehicles; new waves of the Tsum
Tsum line of collectible figures featuring characters from the vast
library of both Disney and Marvel; and, two new additions to our Disney
line with the introduction of Elena of Avalor and Disney/Pixar’s Moana.
In addition, JAKKS Pacific is geared up to serve as global distributor
for Glow Friends by Roxo, an innovative line of interactive light-up
characters; and as U.S. distributor for Ooshies by Headstart, a line of
collectible characters featuring popular licenses.
Working Capital and Cash Flow
As of June 30, 2016, the Company’s working capital was $216.5 million,
including cash and cash equivalents of $86.7 million, compared to
working capital of $232.0 million including cash and cash equivalents of
$110.5 million as of June 30, 2015. Net cash used in operating
activities for the second quarter was $11.2 million, compared to net
cash provided by operating activities of $11.5 million in the year ago
period.
Reiterating 2016 Guidance
For 2016, JAKKS Pacific continues to forecast net sales to increase 7
percent to approximately $800.0 million; diluted earnings per share to
increase 10 percent to approximately $0.78 per share, subject to share
count changes; and Adjusted EBITDA to increase 28 percent to
approximately $65.0 million. This guidance reflects anticipated gross
margin expansion and operating margin growth in 2016.
Share Repurchase
In June 2015, the Board of Directors authorized the Company to
repurchase up to $30.0 million worth of shares of the Company’s
outstanding common stock and/or convertible notes. Approximately 3.2
million shares of common stock at an aggregate cost of $25.2 million,
$0.7 million face amount of our 2018 convertible notes at a cost of $0.7
million and $2.0 million face amount of our 2020 convertible notes at a
cost of $1.9 million were repurchased through the end of the second
quarter. At quarter-end, approximately $2.2 million remained available
in the current buy-back authorization.
Use of Non-GAAP Financial Information
In addition to the preliminary results reported in accordance with U.S.
GAAP included in this release, the Company has provided certain non-
GAAP financial information including Adjusted EBITDA which is a non-GAAP
metric that excludes various items that are detailed in the financial
tables and accompanying footnotes reconciling GAAP to non-GAAP results
contained in this release. Management believes that the presentation of
these non-GAAP financial measures provides useful information to
investors because the information may allow investors to better evaluate
ongoing business performance and certain components of the Company’s
results. In addition, the Company believes that the presentation of
these financial measures enhances an investor’s ability to make
period-to-period comparisons of the Company’s operating results. This
information should be considered in addition to the results presented in
accordance with GAAP, and should not be considered a substitute for the
GAAP results. The Company has reconciled the non- GAAP financial
information included in this release to the nearest GAAP measures. See
the attached “Reconciliation of Non-GAAP Financial Information.”
Conference Call Live Webcast
JAKKS Pacific will webcast its second quarter earnings call at 9 a.m.
Eastern Time/6 a.m. Pacific Time today. To listen to the live webcast
and access the accompanying presentation slides, go to www.jakks.com/investors
and click on the earnings website link under Presentations at least 10
minutes prior to register, download and install any necessary audio
software. A replay of the call will be available on JAKK Pacific’s
website approximately one hour following completion of the call through
August 19, 2016 ending at 11:59 p.m. Eastern Time/8:59 p.m. Pacific
Time. The playback can be accessed by calling (888) 843-7419 or (630)
652-3042 for international callers, passcode “4293 5558#” for both
playback numbers.
About JAKKS Pacific, Inc.
JAKKS Pacific, Inc. (NASDAQ: JAKK) is a leading designer, manufacturer
and marketer of toys and consumer products sold throughout the world,
with its headquarters in Santa Monica, California. JAKKS Pacific’s
popular proprietary brands include BIG-FIGS™, XPV®, Real Construction®,
Max Tow™ and Friends, Disguise®, Moose Mountain®, Funnoodle®, Maui®,
Kids Only!®, as well a wide range of entertainment-inspired products
featuring premier licensed properties. DreamPlay Toys, LLC is a joint
venture between JAKKS and NantWorks LLC to develop, market and sell toys
and related consumer products incorporating NantWorks’ proprietary iD™
recognition technology. Through JAKKS Cares, the Company’s commitment to
philanthropy, JAKKS Pacific is helping to make a positive impact on the
lives of children. Visit us at www.jakks.com and
follow us on Instagram (@jakkstoys),
Twitter (@jakkstoys)
and Facebook (JAKKS
Pacific).
© 2016 JAKKS Pacific, Inc. All rights reserved.
Forward Looking Statements
This press release may contain “forward-looking statements” (within the
meaning of the Private Securities Litigation Reform Act of 1995) that
are based on current expectations, estimates and projections about JAKKS
Pacific’s business based partly on assumptions made by its management.
These statements are not guarantees of future performance and involve
risks, uncertainties and assumptions that are difficult to predict.
Therefore, actual outcomes and results may differ materially from what
is expressed or forecasted in such statements due to numerous factors,
including, but not limited to, those described above, changes in demand
for JAKKS Pacific’s products, product mix, the timing of customer orders
and deliveries, the impact of competitive products and pricing, and
difficulties with integrating acquired businesses. The “forward-looking
statements” contained herein speak only as of the date on which they are
made, and JAKKS undertakes no obligation to update any of them to
reflect events or circumstances after the date of this release.
JAKKS Pacific, Inc. and Subsidiaries | ||||||||||
Condensed Consolidated Balance Sheets | ||||||||||
June 30, | December 31, | |||||||||
2016 | 2015 | |||||||||
(In thousands) | ||||||||||
ASSETS | ||||||||||
Current assets: | ||||||||||
Cash and cash equivalents | $ | 86,693 | $ | 102,528 | ||||||
Restricted cash | 9,933 | – | ||||||||
Accounts receivable, net | 132,892 | 163,387 | ||||||||
Inventory, net | 71,468 | 60,544 | ||||||||
Income taxes receivable | 23,435 | 24,008 | ||||||||
Prepaid expenses and other | 28,102 | 31,901 | ||||||||
Total current assets | 352,523 | 382,368 | ||||||||
Property and equipment | 121,111 | 112,088 | ||||||||
Less accumulated depreciation and amortization | 97,011 | 93,653 | ||||||||
Property and equipment, net | 24,100 | 18,435 | ||||||||
Goodwill | 43,631 | 44,199 | ||||||||
Trademarks & other assets, net | 42,638 | 47,618 | ||||||||
Investment in DreamPlay, LLC | 7,000 | 7,000 | ||||||||
Total assets | $ | 469,892 | $ | 499,620 | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||
Current liabilities: | ||||||||||
Accounts payable and accrued expenses | $ | 105,166 | $ | 89,067 | ||||||
Reserve for sales returns and allowances | 8,960 | 17,267 | ||||||||
Income taxes payable | 21,926 | 21,067 | ||||||||
Total current liabilities | 136,052 | 127,401 | ||||||||
Long term debt, net | 207,526 | 209,166 | ||||||||
Other liabilities | 5,173 | 5,155 | ||||||||
Income taxes payable | 2,325 | 2,199 | ||||||||
Deferred tax liability | 2,297 | 2,293 | ||||||||
Total liabilities | 353,373 | 346,214 | ||||||||
Stockholders’ equity: | ||||||||||
Common stock, $.001 par value | 21 | 21 | ||||||||
Additional paid-in capital | 179,421 | 194,743 | ||||||||
Treasury stock | (24,701 | ) | (28,322 | ) | ||||||
Accumulated deficit | (25,175 | ) | (3,391 | ) | ||||||
Accumulated other comprehensive loss | (13,709 | ) | (10,051 | ) | ||||||
Total JAKKS Pacific, Inc. stockholders’ equity | 115,857 | 153,000 | ||||||||
Non-controlling interests | 662 | 406 | ||||||||
Total stockholders’ equity | 116,519 | 153,406 | ||||||||
Total liabilities and stockholders’ equity | $ | 469,892 | $ | 499,620 | ||||||
Working Capital | $ | 216,471 | $ | 254,967 | ||||||
JAKKS Pacific, Inc. and Subsidiaries | ||||||||||||||||||||
Second Quarter Earnings Announcement, 2016 | ||||||||||||||||||||
Condensed Statements of Operations (Unaudited) | ||||||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||||||
(In thousands, except per share data) | (In thousands, except per share data) | |||||||||||||||||||
Net sales | $ | 140,977 | $ | 131,106 | $ | 236,786 | $ | 245,307 | ||||||||||||
Less cost of sales | ||||||||||||||||||||
Cost of goods | 74,815 | 73,338 | 126,993 | 135,839 | ||||||||||||||||
Royalty expense | 19,299 | 16,797 | 30,533 | 32,314 | ||||||||||||||||
Amortization of tools and molds | 2,063 | 1,684 | 3,277 | 2,489 | ||||||||||||||||
Cost of sales | 96,177 | 91,819 | 160,803 | 170,642 | ||||||||||||||||
Gross profit | 44,800 | 39,287 | 75,983 | 74,665 | ||||||||||||||||
Direct selling expenses | 8,892 | 9,239 | 20,451 | 16,101 | ||||||||||||||||
Selling, general and administrative expenses | 34,415 | 30,662 | 65,033 | 61,419 | ||||||||||||||||
Depreciation and amortization | 2,593 | 2,394 | 5,415 | 4,352 | ||||||||||||||||
Loss from operations | (1,100 | ) | (3,008 | ) | (14,916 | ) | (7,207 | ) | ||||||||||||
Other income (expense): | ||||||||||||||||||||
Income from joint ventures | 861 | 1,684 | 861 | 1,684 | ||||||||||||||||
Other income | – | – | 75 | – | ||||||||||||||||
Interest income | 18 | 16 | 34 | 35 | ||||||||||||||||
Interest expense | (3,220 | ) | (3,106 | ) | (6,446 | ) | (6,080 | ) | ||||||||||||
Loss before provision for income taxes | (3,441 | ) | (4,414 | ) | (20,392 | ) | (11,568 | ) | ||||||||||||
Provision for income taxes | 704 | 1,313 | 1,136 | 1,740 | ||||||||||||||||
Net loss | (4,145 | ) | (5,727 | ) | (21,528 | ) | (13,308 | ) | ||||||||||||
Net income (loss) attributable to non-controlling interests | 224 | (47 | ) | 256 | (47 | ) | ||||||||||||||
Net loss attributable to JAKKS Pacific, Inc. | $ | (4,369 | ) | $ | (5,680 | ) | $ | (21,784 | ) | $ | (13,261 | ) | ||||||||
Loss per share – basic and diluted | $ | (0.27 | ) | $ | (0.30 | ) | $ | (1.30 | ) | $ | (0.69 | ) | ||||||||
Shares used in loss per share | 16,402 | 19,108 | 16,818 | 19,115 | ||||||||||||||||
JAKKS Pacific, Inc. and Subsidiaries | ||||||||||||||||||||
Reconciliation of Adjusted EBITDA | ||||||||||||||||||||
For the Three and Six Months Ended June 30, 2016 and 2015 | ||||||||||||||||||||
Reconciliation of GAAP to Non-GAAP measures: |
||||||||||||||||||||
This press release and accompanying schedules provide certain |
||||||||||||||||||||
Investors should not consider these measures in isolation or as a |
||||||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||||||
(In thousands) | (In thousands) | |||||||||||||||||||
Net loss | $ | (4,145 | ) |
|
$ | (5,727 | ) | $ | (21,528 | ) |
|
$ | (13,308 | ) | ||||||
Income from joint ventures | (861 | ) |
|
(1,684 | ) | (861 | ) |
|
(1,684 | ) | ||||||||||
Other income | – |
|
– | (75 | ) |
|
– | |||||||||||||
Interest income | (18 | ) |
|
(16 | ) | (34 | ) |
|
(35 | ) | ||||||||||
Interest expense | 3,220 |
|
3,106 | 6,446 |
|
6,080 | ||||||||||||||
Provision for income taxes | 704 |
|
1,313 | 1,136 |
|
1,740 | ||||||||||||||
Loss from operations | (1,100 | ) | (3,008 | ) | (14,916 | ) | (7,207 | ) | ||||||||||||
Depreciation and amortization | 4,656 | 4,078 | 8,692 | 6,841 | ||||||||||||||||
Restricted stock compensation expense | 461 | 440 | 1,084 | 944 | ||||||||||||||||
Adjusted EBITDA | $ | 4,017 | $ | 1,510 | $ | (5,140 | ) | $ | 578 |
Contacts
JAKKS Pacific, Inc.
Sara Rosales Montalvo, 424-268-9363
or
Joel
Bennett, 310-455-6210